- The global definition of employment involves work for payment, encompassing self-employment, wage work, and salary work where compensation is received. In India, there is a trend of categorising certain unpaid work, notably in family enterprises like farms or shops, as ’employed.’
- In rural areas, youth unemployment is less, but that’s because the people don’t even see themselves as finding work. So, they don’t look for it. In other words, [they are], what you would call, ‘discouraged workers’. There are those who know there are no jobs available and so they’re not actively looking for work.
- Whatever you get, [whether it is] piped fuel, piped water, it should be your right. They’re seen as things that the government has to deliver. They’re seen as essential services and amenities that are the government’s responsibility to provide. [But] here, we’re treating it as a gift.
- Again with the labharthis, the bottom 30-40% are also not better off and possibly worse off, because we are looking at average wages. We know those are stagnant but median wages are probably falling more, which means that the bottom 50% are actually getting lower real incomes and how much of that can be substituted by a little bit of cash transfer or a little bit of a free gas cylinder once is certainly an issue.
- The approach is to divert and to Hindutva-ise the population. It’s more important to be proud to be a Hindu and to feel that this government is making you very proud to be a Hindu, etc. than to want a better material condition for yourself.
In a discussion with The Wire’s founding editor M.K. Venu, renowned economist Jayati Ghosh covers a wide range of topics, including the global definition of employment and its application in India, the challenges faced in rural areas where certain unpaid work is classified as ’employed,’ and the broader socio-economic implications of the government’s approach.
Ghosh also addresses concerns about essential services being treated as gifts rather than rights and shares thoughts on the impact of economic development policies on different income segments.
Reproduced below is the full transcript of the interview.
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Hello and welcome to this special discussion on the interim budget presented by the finance minister in Parliament today [February 1]. Today, our focus is on the overall impact of the economic policies pursued by the Modi government over the last decade. The interim budget speech was pretty much an encapsulation of what the government had done or not done in the last 10 years.
We have Jayati Ghosh, a well-known development economist, who’s currently teaching at the University of Massachusetts at Amherst, to discuss in detail some of the aspects of what was said today and what has been promised over the next five years, because the speech more or less assumed that Mr Modi is coming back to power and that is generally the assumption on which the tenor of the speech was.
So, Jayati, welcome to our programme. So, why don’t you just kick off by just telling us what are your initial impressions of the budget?
It was expected that this would be really an election manifesto, or not a manifesto so much as a celebration of the Modi government’s record, which doesn’t have to depend on any reality. It doesn’t have to depend on what has actually happened so much as what they have imagined or would like everyone in India to believe has happened. So, yes, there’s a lot of self-congratulation, and there’s a lot of presentation of India as sort of almost on the road to ‘Viksit’, that we’re almost there.
Viksit Bharat, yeah
But what is also notable, I think, is that many of the promises that were made earlier, whether it is ‘Achche Din Aayenge’, in terms of aspirational young India, or doubling of farmers’ incomes, etc., all of those have simply fallen by the wayside and they’re just simply not mentioned anymore and instead, now we have this projection of a developed India, Viksit Bharat, which is apparently all about to happen on the basis of startups and a few cherry-picked data from corporate behaviour and so on.
Jayati, I would like you to elaborate on two things notable in her speech. Firstly, now this is a narrative that the government has built or is still building, and it will go into the [upcoming] elections. One of the narratives, which Prime Minister Modi has also spoken about, is that they have delivered welfare ‘at scale’. Nirmala Sitharaman used the term ‘at scale’ as she listed various welfare schemes. We all know about them – the Ujwala gas scheme, PM Kisan’s direct money transfer to farmers, and ‘Har Ghar Ko Jal,’ providing clean tap water to households. It’s about development on a large scale. So, [this indicates] development at scale.
The second proposition was that the Modi government, as opposed to previous regimes, has empowered the people to participate in development, as opposed to the approach of the earlier governments, which mainly created entitlements. Nirmala Sitharaman suggested that they moved from a regime of entitlement to a regime of empowerment. Now, this is a slogan. This is a narrative that they’re building. Now, I don’t know how providing free food to 80 crore people align with ‘entitlement’ or ’empowerment’. So, I would like you to just weigh in on these two slogans which are part of the narrative.
I think the tragedy really is that the previous regime had begun to move towards a notion of rights. Rights-based public service delivery and the notion that citizens have rights to demand of their state. Unfortunately, now we’ve gone back to the government treating anything it provides to the people as gifts, as a present from the prime minister, really, and that’s extremely unfortunate. That’s much much less empowering.
Yeah, ‘Modi ki guarantee‘, that’s the slogan.
Right, entitlements are not gifts, and yet this rejection of entitlement is part of the broader rejection of rights. That has been very evident in this government. You name it, social economic rights, political and civil rights, all of them are being undermined under this government and therefore, what they’re calling empowerment is really now going back to the mai baap sarkar, going back to the idea that the state, if it’s nice to you and if you’re nice to them and behave yourself, they will provide for you.
Also read: Narendra Modi Says Focus on Duties and Forget Rights, but He’s Let India Down on All 11 Duties
Jayati, another interesting sort of aspect of their narrative is that obviously, in the absence of authentic data, they have managed to confound and confuse people. Even academics do not know how to sort of assess the real nature of growth and employment that might have been created in the last 10 years. So, how do you look at the employment scenario? I’m talking about [the employment scenario] over 10 years and also the income scenario.
The finance minister made a very astounding claim that average incomes had gone up by 50%, real incomes had gone by 50% in the last 10 years. I would like to point out that the government’s own survey, which was released some time ago, the Periodic Labour Force Survey, data shows that at least from 2017-18 to 2022-23, in five years, average regular wages were stagnant in nominal terms, more or less stagnant, so in real terms they would have actually gone down by about 25%. So, how does this square? This is the government’s own data. [How does this] square with the finance minister’s stupendous claim that real incomes have gone up 50%. I just want you to talk about this.
As you say, clearly, it doesn’t square. Clearly, this is a falsehood. I mean there are many who believe that if you repeat a lie often enough and through as many channels as possible and with as many spokespersons as possible, then people will come to believe it and that’s really part of the reason why this government has suppressed so much data and information.
We have, we had, a wonderful statistical system which is being systematically destroyed. The consumption surveys have not been done, which is unbelievable. They suppressed the 2017-18 consumption survey because it showed rural consumption falling and they didn’t like that. So, they suppressed it altogether and they haven’t conducted one since, which really tells that they possibly know what’s going on and they don’t want the rest of us to know exactly how much has changed in terms of worsening situations.
We haven’t even had a census. We don’t know how many people are there in the country. All of our estimates are based on extrapolations from 14 years ago. It’s ridiculous, actually. You cannot govern a country if you don’t know how many people are there, how old they are, where they are, what they do, how they live, which the government apparently doesn’t want to know, because it wants to keep creating these delusions that you may not be doing well but everybody else is doing well. That’s really how they are handling this narrative so that those who do not find jobs, those whose real wages don’t increase, those who have ever more fragile material circumstances think that they are unlucky or they haven’t done what is required.
And everyone else is obviously doing well because so far, that’s what they keep telling you. This is the only data that they’re still providing and I hope they continue to provide. It is the labour force surveys. Those give a very very different story, as you’ve mentioned. So, the labour force surveys and the data on wages in India, which come out of the Labour Bureau, tell us about real wage stagnation.
In fact, almost through the entire period of the Modi government, because of [several policies such as] demonetisation, it’s not surprising we know that had a massive impact on the informal sector and real wages. We know that GST [goods and services tax] further destroyed the MSMEs [micro, small and medium enterprises], and then we know that COVID-19 and that terrible lockdown, that brutal lockdown, without adequate social protection was another devastation.
Now, all of these have negative multiplier effects that persist. They don’t just go, [they’re] not just a one-year thing. These persist over the longer term and that’s why we have such a K-shaped recovery where the top 10-15% of the population is doing very well and really has bounded and growing like anything, but the vast majority of the workers are really in very straightened circumstances and not improving. That’s why, for example, we don’t get improvement in nutrition indicators.
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True.
But, you know, can I add one thing, Venu? This, it’s not just about the conditions of people which is, of course, what the main purpose of economic policy is, but all of this has a macroeconomic impact. So, the government’s own, they produced something in lieu of an economic survey, a kind of pamphlet, celebrating the government once again. The finance ministry, the chief economic advisor’s office, has produced [the pamphlet] in which they are trying to identify all the wonderful things. They’ve divided the whole of the previous period before 2014 as one period and then the period after that as the Golden Age.
What we find there, even in terms of the data they’ve presented, if you just compare let’s say, the investment rates of the United Progressive Alliance and the National Democratic Alliance, that is the period from 2004-05 to 2014 and then 2014 to 15 to the latest data, the investment rates under the UPA were around 33.4% on average. I just looked at that and calculated that. The investment rates under the Modi government have been 28.9% on average and there has been no year, not a single year in which the investment rate has even crossed 30% under this.
You’re right, Jayati. There is consensus, complete consensus, even in the industry that there has been no meaningful pickup in private investment in the last 10 years under the Modi regime. Now, this is something that even people within the government admit but they don’t say it publicly, because it’s the weakest performance over a decade in any decadal period that you see in terms of private investment.
But, now that’s the thing, that the two are related. You can’t keep suppressing the wages and [also] not improve the conditions of your people and then hope that you will have a growing mass market. So, the big difference that we have with other countries with large populations like China, is that we don’t have a growing domestic mass market. That’s why you’re not getting an increase in private investment and that’s why those who do invest don’t get the benefits of economies of scale because we have lots of people but not enough purchasing power. So, all of those are actually adding to lower economic performance.
Yeah, and Jayati, this is actually what you just said is captured even by large companies in India, who basically sell in the rural markets mostly, like Hindustan Unilever. Sixty percent of the products are in the rural market. I have been hearing their CEOs saying for the last two years that there has been no volume pickup at the bottom 60%, where soaps, shampoos, toothpaste [are sold].
While they say that some incipient pickup may be happening in the last three to four months, generally, for the last 10 years, sales have been stagnant in rural areas. With regard to motorcycle sales, Rajiv Bajaj, CEO of Bajaj scooters, has said that growth sales today are 30% lower than what they used to be in 2016-17 or 2015-16. So, that is the level of destruction of consumer demand in the rural sector, but coming back to the PLFS survey, because that is the only data which the government has proudly sort of presented. I think we make do with whatever we get out there, besides the stagnant regular wages, monthly wages over the [last] five years, from 2017-18 to 22-23.
There is another very astounding piece of information in the data that they give. That is the number of self-employed people in the economy. That has gone up from 52% in 2017-18 to 58% in 2022-23.
The increase in [the number of] self-employed [persons] is also accompanied by a large number of people being employed without any payment. Unpaid workers. So, labour economist Santosh Mehrotra has calculated that the number of unpaid workers in these five years, from 2017-18 to 2022-23, has gone up from roughly 40 million to 905 odd million. So, we are staring at about 95 million people working without wages.
Now, I want you to see this in the context of the empowerment argument of this government. They have empowered people through various schemes, [such as] the Mudra scheme, Svanidhi scheme, and others. If indeed their claim is that they have empowered people, why are there so many unpaid workers? Why are people working without [wages]? How do you see it?
So, first of all, the fact that such workers are included in the employed [category] is a flaw in the way the data is presented.
Yeah, Santosh Mehrotra says that also. The ILO definition does not allow that.
Exactly, the global definition of employment is work for payment and it could be self-employment, it could be wage work, salary work, but you have to get paid for it.
What has happened in India is that we’re starting to club some of this unpaid work, not all of it, but, some of it which is recognised as unpaid in family enterprises like farms or shops and so on are being classified as employed, which would not fly in any other country. So, that’s a problem, number one. But number two, if you remove those, you don’t actually get any increase in employment. In fact, [C.P.] Chandrasekhar and I wrote an article quite recently in which we looked at the actual employment levels and there is no increase. Once you remove the unpaid workers, that itself is really shocking.
Also read: Ten-Year Record on Employment: Does the Reality Match the Promises or Claims?
Have you got a rough estimate of youth unemployment in our country, say between 18 and 25 or other age group?
It’s very high. It’s very high and I had to look up the numbers, but it’s also gone up and let’s say, for young women, in particular, especially in urban areas, it’s one out of three actively looking for work and not finding it. Now that leaves one out of three women, young women, actively looking for work and not finding it.
And in rural areas?
In rural areas, it’s less, but that’s because they don’t even see themselves as finding work, so they don’t look for it. In other words, [they are] what you would call ‘discouraged workers’.
There are those who know there are no jobs available and so they’re not actively looking for work. When the survey asks them if they are actively looking for work, they say no because they know there are no jobs and that’s really, I think, the extent of employment.
To me that is the biggest challenge our country faces. The fact that we supposedly have a demographic divide and we have more and more young people who’ve even been through tertiary education and we are not providing jobs for them, not even poor quality jobs for them. To me that is the most terrifying part of the whole economic growth process that we have got and it is unbelievable to me that the government, while accounting its performance, doesn’t even mention this as an issue, because to me that’s the central economic challenge today.
True. So, Jayati, if one were to sort of take as a corollary to what you just said, your argument, if you can’t, if you don’t add unpaid workers as part of the employed, that means the total number of employed will actually collapse. It will come down by that much, see 95 million. So which means…
We don’t know the millions, I won’t go into [that] because we frankly don’t know how many people are there. We don’t have [a number], so let’s just stick to proportions right now, because really, this is the tragedy of not having a census. We genuinely do not know how many people are there. We can’t operate on the basis of extrapolations of 14 years ago.
But broadly, one could conclude that the labour participation ratio in India, of both men and women, particularly women, is very poor. However, on average, it is much lower than many other comparable developing economies in East Asia, China, wherever you take, Bangladesh, isn’t it?
Absolutely. For men, it’s in the range of 45% to 50%, for women it is 18%. One of the lowest in the world, we’re out there with Saudi Arabia.
Women working at a job site in a village in Rajasthan under the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA), which requires internet access for wages to be paid, September 2022. Photo: Human Rights Watch
Also read: Illusory or Real? Unpacking the Recent Increase in Women’s Labour Force Participation in India
For women, it is significantly lower. I’m referring to the finance minister’s budget speech where she discussed the government’s policies in economic and social realms, particularly emphasising a focus on women, youth, and ‘Annadatha‘, representing farmers. I’m just wondering if this is the ratio of women’s participation in the labour market, one might question the efficacy and outcomes of the government’s targeted efforts to uplift women as a specific category. It remains an open question for consideration.
It’s literally that you do not provide an economy that will generate opportunities. Instead you provide a few you know a few crumbs from the table. You say okay, we’re going to give you access to the pipe, well we won’t give you access, we will simply give you one free gas cylinder and after that, you’re on your own. So you are a labharti. You don’t have any rights, you don’t have haq, you only get laabh (benefit), which is a present from the prime minister. That’s the strategy, really, that whatever you get, which should be your right, I mean, let’s face it, piped fuel, piped water, these are seen in most countries of the world, including in many of our neighboring countries with lower levels of per capita income. They’re seen as things that the government has to deliver. They’re seen as essential services and amenities that are the government’s responsibility to provide. [But] here, we’re treating it as a gift.
You’re getting a gas cylinder and that’s a real present for you as a woman from the prime minister. So, it’s a complete reversal of the whole idea that really sustainable and equitable economic development has to be rights-based.
So, there’s something interesting I want to share with you. In the UP elections that I went to cover in the last assembly elections, we went to like remote villages and we found that the older people in the household were satisfied or somewhat like happy that the government was giving them free food grains, etc., but the younger ones were saying that we want employment, and that this is not a permanent solution.
So, we found that the households were also split in terms of their opinion. So, it appeared to us that this labharthi scheme has definitely benefited the BJP, but it’s an open question as to how many times will the same labharthi scheme benefit because when they claimed that in Ayodhya they gave the 100 millionth gas cylinder, now there is no accounting of how many people are actually able to afford refills, or how many refills are happening. There is no data survey on that.
Well, they did some in the beginning and when the results were not to their satisfaction, they have stopped monitoring that information just like everything else. A couple of other things that I just quickly noticed when looking at some of the numbers that I thought are important to share with you. One has to do with federalism, this is really a very anti-federal Central government. It’s very centralising. It has been taking over more and more of the decisions but leaving the responsibilities to states, but one of the things that is, to me, really shocking, is the way in which it has more or less bypassed the Finance Commission’s recommendations to provide 42% of tax revenues to the state.
If you remember, they made a big show of agreeing to those recommendations. They managed to circumvent this by shifting a lot of taxes onto cesses and surcharges.
Yeah, up to 25% now, I think, up to 25% of the total taxes are in the form of cesses, right?
Yes and you know, as a result what that has meant. It means that in 2022-23, it was only 31% going to the states, instead of 42% and in 2023-24, only 30.4%.
So, that means, by increasing the component of cesses, which need not be shared with the states, they actually lowered their [share].
In other words, the constitution allows them, unfortunately, and the Finance Commission should really comment on this, that they have completely bypassed the Finance Commission recommendation with this rather cheap trick.
Okay, so, this can’t be challenged in a constitutional court.
That’s right, yeah, well, I mean, I think it should be, but we can see, but you know, there’s another thing that is just worth noting. The budget, the speech didn’t really cover some of the plans that the government has in terms of pre-election. In other words, it doesn’t feel like a pre-election budget, they’re not increasing, they didn’t make a big splash saying we’re going to do this, we’re going to do that.
I noticed that, yeah.
And how do I know this? Well, let’s just take two of the items of expenditure – agriculture and family welfare and rural development, okay? Now, in rural development, they had spent only, I’m just looking for the number, basically they had spent significantly less than they’re supposed to but the budget estimate has suddenly enlarged this figure. Now, that is the MGNREGA scheme and I would be very happy if they spend more but they are promising to spend 40% more of what they had already spent just in the last three months of the year.
That’s because they had under-budgeted. The demand was much more for MGNREGA, right?
That’s right, of course, it’s still under-budgeted. It will still remain but I’m not really sure what they’re going to spend it on because rural development contains a lot of things, but they have gone beyond last year’s budget estimate in this year’s revised estimate. Even though the Controller General of Accounts data suggests they have only spent 70% of the budget estimate, so they clearly now said that, I mean, they’re clearly planning to spend a lot because they made a larger revised estimate figure.
Also read: High Demand for MGNREGA Is a Ringing Fire Alarm
And here, Jayati, on this I must sort of just add for the sake of our viewers, that if you recall, Mr Modi had described MGNREGA as a monument of the previous regime’s, Congress regime’s, failure, again on the same logic that it was an entitlement, not an empowerment. It was a dole as opposed to Modi’s policies of empowerment. So, he has actually expanded the dole based on, of course, ground up demand. Again, that also reflects the state of the economy.
Well, no, we should be clear that this is a government that has massively underprovided for MGNREGA. It has systematically denied the money that is necessary and that has been in the labour budgets of states. Using it as an openly political thing, right, I mean, denying money for two years to West Bengal.
No yeah, you’re right. It is selectively denying to opposition states but it has considered that there is a huge demand for MGNREGA and therefore, they’ve had to expand the MGNREGA budget, as opposed to previous regimes, right?
But you know, the other one that we should look out for is in agriculture and family welfare, because you just look at the total budget estimates. The budget estimate for this current year, the one we’re in, was Rs 1.15 lakh crore, okay? However, the revised estimate is Rs 2.16 lakh crore. More than 100 crore more. Meanwhile, until December, they’ve only spent Rs 7,000 crore so. Suddenly, they’re going to spend another Rs 1.40 lakh crore over the next two months. How are they going to do this? This is what they’re claiming they’re going to spend, according to the revised estimate. Either they’re going to do a big splash increase in the amount of PM Kisan or do something else. I mean, this is clearly leaving a window open for some kind of a pre-election sop.
So, you’re saying that they are basically providing for a pre-election sop and and then, when the Election Commission, when the code of conduct comes, they can say that we had already done this before. So, this is in continuum.
I think what they will have to do is, I mean, they will obviously influence when the Election Commission announces elections and they’ll announce it before that. Maybe the day before that or something.
Yeah, or otherwise they can even claim that this was already announced before the Model Code of Conduct came into force, right, or before the elections were announced. They could claim that also.
Well, you see, they haven’t said it, they haven’t declared it in any statement here, but they have clearly budgeted for something. You don’t get such a dramatic increase.
So, let’s see. We’ll see how this pans out in the next two months. So, coming to some of the macro aspects of the budget, how do you characterise the big claim by this government on capital expenditure?
So, on paper they say that from 2014-15 onwards, I’m talking about a 10-year period there, they’re saying that they’ve increased capital expenditure by five times and it has now gone up to Rs 10.5 lakh crores. What is your sense? Why has such a huge amount of capital expenditure not produced the right amount of economic outcome in terms of bringing in private investment? Private investment, as we all know, has been stagnant. So, what is going on? What’s your sense as a macroeconomist?
I think here we go back to the question we talked about earlier, employment. So, most of this capital expenditure is in construction. I mean, I have noticed BJP loves roads. They did this also with NDA.
Representative image of a road under construction. Photo: Joegoauk Goa/Flickr (CC BY-SA 2.0)
Roads, bridges, yeah.
These are extremely capital intensive expenditures. Very little employment is generated. In fact, employment in construction has been falling for the last few years. So, this is not going to generate much in terms of multiplier effects, and they don’t really do much capital expenditure in the things that matter 2 health, education, sanitation, all of the areas where you would generate more employment as well. If you’re building your hospitals, you need people to staff them and so on and so forth. It’s mainly in terms of the transport infrastructure, and then of course, you go for the big ticket items. You go for a high-speed train, for example, or you go for new airports or expanding ports. I’m not saying these are bad. Of course, you need them but you have to have a balance between that and the needs of the employment generation.
Unfortunately, the entire focus is simply on all of these kinds of big construction projects.
Similarly, what’s happening now around Ayodhya and so on. These are all heavily capital intensive. In Ayodhya, you will get religious tourism, so that’s slightly different but in most of these other places, you don’t get the secondary effects in terms of employment generation and so that the problem of the inadequate domestic market persists. So, a lot has to do with the nature and the quality of that capital investment.
Also read: Ten Years of Modi Govt Rule Marked by Underachievement, Lost Potential for India’s Economy
Okay, so you’re saying that it’s not really producing the crowding and effect which otherwise it should have. That’s what you’re saying, given the nature, the quality of the expenditure.
Again, to take the example of China, when China was doing a huge amount of capital investment, there was about, I mean, they’ve been spending 20% on infrastructure, 20% of GDP for three decades now, but they’re doing this in a much more equal society. They’re doing this in an economy where real wages were going up by 5% to 6% to 7% to 8% every year, and therefore, you had a mass market simultaneously. Therefore, private investors got all of the supply benefits from the infrastructure and all of the demand benefits from the rising real wages and so that’s why they were all falling over themselves to invest.
Okay, Jayati, what do you reckon this government has been claiming ad nauseam, that they have increased farmers’ income? Of course, they’ve been shifting the goalposts over the last 10 years. First, they claimed 50% over the cost of production, then they said they would double the farmers’ income. They shifted to another metric, doubling. So, what’s your sense? Are farmers’ incomes stagnant, or how much do you reckon they have…?
Depending on the region, in some parts of the country, farmers’ incomes are actually declining, not even stagnant, and in fact, there’s going to be another big farmers’ mobilisation, I believe, later this month because clearly, farmers have not benefited from this.
If you notice, hardly any official spokesperson mentions doubling of farmers’ income anymore and it’s not in any of the recent documents either. They want everyone to forget about it and now just talk about Viksit Bharat, so basically, they’ve just abandoned that or something that they’re not going to achieve. There’s only so many times you can push back the year.
Representational image. Photo: Rajarshi MITRA/CC BY 2.0
Yeah, Jayati, one last question, which has to do with the philosophical framework of this government. Now, as far as I can see, I may be wrong but this is what my assessment is, that Mr Modi has clearly kind of determined one thing, which is that he has to keep the big businesses happy and he has done a lot for the big businesses and we all know it. The kind of tax cuts that they got in order to boost corporate balance sheet profits, interest rates, post-COVID reductions and before that Rs 1.45 crore tax breaks in 2019 etc.
So, he has kept the businesses happy, especially the big businesses, and he has also tried to keep the bottom 30%-40% happy through labharthi schemes. However, it seems to me that in the last 10 years, the middle class really has had to bear the brunt of the BJP’s economic policies, whether you take petrol prices, diesel prices. When I say middle, I also include the lower-middle class.
How do you characterise the pain that the middle class has been subjected to? Now, there’s one theory that Mr Modi is not bothered about the middle class because he thinks that they’ll not go anywhere, they’ll vote for him, and they’re pretty much Hindutva-ised as they say, so therefore, focus on the big business, focus on the bottom 20-30%, labharthis and the job is done. How do you see this?
Again with the labharthis, I’m not really sure, because most of my own feeling is that, the bottom 30-40% are actually also not better off and possibly worse off, because we are looking at average wages. We know those are stagnant but median wages are probably falling more, which means that the bottom 50% are actually getting lower real incomes and how much of that can be substituted by a little bit of cash transfer or a little bit of a free gas cylinder once is certainly, I think, an issue.
So, I’m not sure that, you know, I think basically, it’s the approach is to divert and to, as you say, Hindutva-ise the population and say well, you know, it’s more important to be proud to be a Hindu and to feel that this government is making you very proud to be a Hindu, etc. than to want a better material condition for yourself.
One last question, where do you see, since you teach economics abroad and you also keep track of the global economy, where is India positioned today in the context of what’s happening in the world economy, we are still seeing a lot of distress and pain in the global economy. Inflation is high, relatively high and there is a lot of literature on how inflation is eating into real incomes across the world. Interest rates are high. How do you locate India and India’s growth impulses against this backdrop?
This is a bit of a complicated story because geopolitically, India is in a very favourable place. I mean, the Western countries need India like never before. They need India as a bulwark against China as a potential ally, given that Russia is also there and they’re fighting a war etc. So, they will bend over backwards to provide assistance to whichever government is in place in India but particularly now, since they’ve all established relationships with Mr Modi, they will definitely do whatever they can to benefit Mr Modi. Having said that, global investment, global businessmen is a slightly different thing,
Yeah, the FDI figures are not showing any uptick. FDI is stagnating, actually.
That’s precisely for the same reason the domestic investment is not showing any uptick. In other words, finally they’re going to be looking at your domestic market and yes, the top maybe 150 million are doing brilliantly but there is a limit to how much you can actually get a benefit from that. If you have a huge potential market, if you have 1.4 billion people, that would make sense if those people had purchasing power and then you would get a lot of interest but the denial of, you know, improving conditions for the bulk of our population, for let’s say 100, for one billion people is what is coming down to bite us, I would say, and if we really want to be in a favourable position in the global economy, we should look to our strengths and ultimately, our strengths are our people. So, we have to genuinely empower them, not claim that we’re empowering them in the form of giving presents or labharthi etc. etc., but genuinely empower them by providing economic opportunities, especially to the women and especially to young people.
Yeah, so essentially you’re saying that this government, in spite of all its claims, has not really moved from labharthi economics to a genuine economic empowerment framework, right?
I would say it’s worse. It has dragged us back. We were in a rights-based framework. It wasn’t anywhere as good as we wanted but it still was beginning to happen. We were broadly within a rights-based framework and now we’ve been dragged back to the mai baap sarkar and thank you ji huzoor for whatever you give us.
Yeah and Jayati, I must tell you that many industrialists tell me that it’s a given that foreign investors, big foreign businesses will always watch the domestic businesses and they will follow them. First, they wait for domestic businesses to invest and they actually follow them. They see them as the bell weather, you know, so that has not happened, as we all know, private investment really has not picked up meaningfully. So, a lot to be done for whichever government that comes to power next. Thanks, thanks Jayati, a lot for-
Just a final point, you see even the thing is that the economy is not like people, it will do what it will do, so you can fool the people, but you can’t really kid the economy into being behaving differently.
You’re right but there’s also this…
If you don’t do the things that would generate genuine bottom up growth, then you’re not going to get it.
You’re right but politically there’s also this constant question that people ask as to at what pain point will the people turn, you know, so that’s a million dollar question.
Yeah, this is something I frankly no longer have an answer to. I don’t know.
Thanks, Jayati, for talking to us, yeah, thanks a lot.
Thank you.
Transcribed by Praneetha Bandaru.
